Productivity cost-savings, favourable currency tailwinds boost Diageo’s full-year results

London-based Diageo Plc, said on Thursday that it recorded £12.05bn ($15.83bn) in net sales for the full-year ended June 30, up 14.87% from the previous year’s £10.49bn.

“We have delivered consistent strong performance improvement across all regions and I am pleased with progress in our focus areas,” said Ivan Menezes, group CEO.

The maker of Johnnie Walker whisky and Smirnoff vodka attributes its good fortune to productivity gains, favourable currency tailwinds and broad-based revenue growth across its major markets.

“Our productivity work is delivering ahead of expectations allowing us to reinvest in our brands, drive margin improvement and generate consistent strong cash flow.

“Through productivity we have embedded an everyday efficiency mind set in the business and with improved data and insight we are making faster, smarter decisions on investment choices.”

The spirits maker said it generated £2.7bn in free cash from the different productivity cost-saving initiatives, up from £1.2bn in 2014.

The firm said it would spend £1.5bn ($1.96bn) of that money in buying back its shares from shareholders.

It added that the buyback programme will not detract it from major investment plans it has made which includes increasing advertising and promotional spend as well as more capital intensive projects such as the construction of a new brewery in Kenya, among others.

In its North American market, the firm saw a 3.4% sales lift in U.S. spirits, driven by volume growth and mix, with strong contribution from North American whiskey and Scotch.

The drinks maker saw sustained growth in Europe, especially Russia and Turkey where net sales climbed 5%, driven by reserve brands which grew 9%.

Performance in Africa improved in the second-half, with growth in Nigeria which was partially due to lapping a weaker comparative last year. The company noted that consumer confidence remained weak in Nigeria and value beer remains the fastest growing segment, where it is gaining market share with Satzenbrau and Dubic Lager.

In South Africa, sales growth was driven by price increases; and in its Africa Regional Markets, the firm saw solid growth in Ethiopia.

Latin America and the Caribbean delivered strong results for the drinks maker, with Mexico and Colombia both recording double-digit gains. However, Brazil remained a concern due to ongoing political and macroeconomic challenges in the country.

In Asia Pacific region, the company experienced sales decline due to weak travel retail in the Middle East and South Korea and the effects of demonetization and ban of alcohol sales near highways in India. Net sales in India grew 2%, 25% in Greater China and 3% in the region.

Diageo reported £2.66bn in profit for the full-year, up from £2.24bn from last year.

The company raised its margin improvement objective from 100 basis points (bp) to 175 basis points over the three years to June 2019. It also said it was sticking to its sales target to grow by the mid-single-digits.

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